ADC African Development Corporation AG has sold its 38.74% stake in Resolution Health East Africa to Peter Nduati, CEO and founder of RHEAL, backed by LeapFrog Investments.

The sale represents another profitable exit for ADC, resulting in an IRR of 16% and a multiple of 1.7x on its total investment amount.

LeapFrog, an institutional investor in emerging market financial services companies that pursue social and financial returns, is in turn acquiring a majority ownership stake from a consortium led by Nduati.

The transaction will become effective upon closing, pending regulatory approval.

ADC originally purchased its stake in the Kenyan medical insurance company in December 2010.

ADC and RHEAL have since worked together to strengthen the company’s organizational and financial structures, which facilitated the expansion of RHEAL’s presence into new markets and is now present in both Tanzania and Kenya with an active partnership in Uganda.

RHEAL was founded in 2002 as Kenya’s first medical insurer and was licensed as a General Insurer on the Kenyan market in 2013.

Medical insurance remains its core product with a network of 750 medical service providers across East Africa, up from 400 when ADC first invested in RHEAL almost four years ago.

The divestiture of RHEAL is in line with ADC’s refined strategic focus on the banking sector to create a pan-African banking group, announced in 2013, and to hold existing non-core investments only until market conditions are conducive to a successful exit.

This transaction follows ADC’s profitable exit from RSwitch announced earlier this year.

The sale of the company to a socially responsible investor affirms ADC’s founding philosophy of building local African companies with local leaders at the helm and ensuring that the exit is to the benefit of the portfolio company as well as ADC’s investors.

Karima Ola, CIO of ADC, said: “The exit of RHEAL in a deal which sees LeapFrog, a leading investor in emerging market insurance and financial services companies, stepping in as key shareholder, is a testament to the success achieved by ADC and RHEAL who, together, worked to build a more stable company in a rapidly expanding industry.

“Under the leadership and guidance of CEO and founder, Peter Nduati, RHEAL has expanded and grown exponentially since ADC’s investment in late 2010. The company will now enter a new stage of augmented growth, benefiting from LeapFrog’s resources, experience in the sector and presence across Africa to further support and guide RHEAL’s strategy goals and growth plans across Africa. We are proud to have fostered this partnership and to have profitably exited another ADC investment,” she added.

The deal, which is undergoing final regulatory processes, marks LeapFrog’s second investment in Kenya; in October it announced the sale of its stake in Apollo Investments Limited, one of the top three regional insurers in East Africa, to Swiss Re.

LeapFrog partner Dominic Liber, said: “Resolution is a strong and growing business, with an exceptional management team. In a short time, Resolution has grown to become Kenya’s fourth largest health insurer and positioned itself as a rising star in East Africa’s fast-expanding health insurance space. Our investment positions Resolution to take the next leap in its growth, and we look forward to working with them to expand their reach in health insurance and beyond.”